As this year’s CDP scores are released, it’s a good time to remind ourselves of the growing relevance of voluntary Environmental, Social and Governance (ESG) reporting and ratings. Once seen as a “nice-to-have,” ESG disclosure has now become an important tool for organisations striving to remain competitive, resilient, and aligned with stakeholder expectations.
ESG reporting is the process of disclosing a company’s practices and performance across environmental, social, and governance dimensions. It covers a wide range of issues including carbon emissions, water use, labour conditions, diversity, supply chain ethics, board accountability, and more.
Alongside these disclosures, companies are increasingly assessed and benchmarked through third-party ESG ratings. These ratings evaluate how effectively businesses manage ESG risks and opportunities, offering a quick-reference view of their sustainability credentials to investors, regulators, customers, and supply chain partners.
With growing demand for credible, comparable, and transparent data, both ESG frameworks (which guide how information is reported) and ratings (which measure performance and risk) have become essential in how organisations communicate sustainability progress.
The ESG landscape is evolving rapidly, driven by heightened regulatory pressure, investor scrutiny and market expectation. Businesses are expected to not only comply with mandatory requirements, but increasingly are expected to proactively report on their ESG progress through voluntary frameworks and standards. This reflects the growing trend that sustainability is no longer optional, but rather a strategic imperative.
Benefits of ESG Reporting and Ratings Include:
- Investor Appeal: ESG transparency attracts responsible investors and improves access to capital.
- Regulatory Compliance: Mandatory reporting standards are increasing; compliance avoids penalties.
- Risk Management: Identifying ESG risks helps companies mitigate long-term operational and financial risks.
- Reputation Protection: Proactive ESG reporting helps manage reputational risks and prevents backlash.
- Competitive Edge: ESG reporting sets companies apart, enhancing brand reputation and market positioning.
- Stakeholder Trust: Transparency fosters trust with customers, employees, and communities.
- Cost Efficiency: Tracking ESG metrics often reveals inefficiencies, leading to cost savings.
- Talent Attraction and Retention: Sustainability commitment appeals to purpose-driven employees and enhances retention.
Difference between Standards, Frameworks, and Ratings
Frameworks provide high-level, principles-based guidance to help a company integrate sustainability into their operations, strategy, and decision-making. They offer guidelines for what information should be reported and how it should be structured. Frameworks often allow for flexibility and contextualisation. Frameworks are typically voluntary, though many are referenced in regulation and legislation, such as TCFD, TNFD, and GRI.
Standards, on the other hand, are more prescriptive and detailed. They outline specific, detailed, and replicable requirements on each topic that reporting entities are expected to meet. Standards make frameworks actionable by providing comparable, consistent, and reliable information.1
Ratings, by contrast, are third-party assessments that evaluate a company’s actual ESG performance or risk exposure. They do not guide what to report but instead use reported data to score or rank a company against its peers. Ratings are used by investors, lenders, procurement teams, and other stakeholders to understand how well a company is managing ESG risks and opportunities.
What are the main ESG Voluntary Standards and Frameworks?
TCFD
The Task Force on Climate-related Financial Disclosures (TCFD) provides a framework for disclosing how climate-related risks and opportunities affect an organisation’s financial performance. Structured around governance, strategy, risk management, and metrics/targets, TCFD is now widely adopted globally and forms the basis of several regulatory regimes, including the UK’s climate risk disclosure rules.
CDP
CDP (formerly Carbon Disclosure Project) is a nonprofit that runs a global environmental disclosure system. It covers climate change, water security, and deforestation, with annual questionnaires scored from A to D-. CDP is widely used by investors and large purchasers to assess environmental transparency and risk, and is aligned with TCFD principles.
As an Accredited Solutions Provider for CDP, we know a thing or two about CDP disclosure. And with the new CDP questionnaire opening in less than two months, check out our CDP disclosure packages to ensure your company receives a high score.
TNFD
The Taskforce on Nature-related Financial Disclosures (TNFD) is an emerging framework for assessing and reporting nature-related risks and dependencies. Like the TCFD, it follows a four-pillar structure and encourages organisations to disclose their exposure to biodiversity loss, ecosystem degradation, and nature-related transition risks.
SBTi
The Science Based Targets initiative (SBTi) helps companies align their greenhouse gas reduction targets with climate science and the goals of the Paris Agreement. Participating organisations commit to emissions reduction pathways aligned with 1.5°C or well-below 2°C scenarios.
IFRS S1 & S2
Introduced by the International Sustainability Standards Board (ISSB) under the IFRS Foundation, these disclosure standards aim to harmonise global sustainability reporting. IFRS S1 focuses on general sustainability-related disclosures, while IFRS S2 specifically addresses climate-related disclosures. They build on existing standards like TCFD and SASB, focusing on enterprise value and investor-useful information.
SASB
The Sustainability Accounting Standards Board (SASB) provides industry-specific sustainability disclosure standards focused on financially material ESG factors. Since being incorporated into the ISSB, SASB metrics remain widely used by companies aiming to link ESG performance with financial outcomes and investor decision-making.
GRI
The Global Reporting Initiative (GRI) is the most widely adopted global framework for sustainability reporting. It enables organisations to disclose their environmental, social, and economic impacts using a comprehensive set of standards that prioritise stakeholder inclusiveness and impact-based materiality. GRI is often used in combination with other standards such as SASB or TCFD.
What are the main ESG ratings?
EcoVadis
EcoVadis is a sustainability ratings platform focused on corporate social responsibility, evaluating companies across four themes: Environment, Labour & Human Rights, Ethics, and Sustainable Procurement. Scores are used extensively in supply chain due diligence and vendor selection.
MSCI ESG Ratings
MSCI provides ESG scores ranging from AAA to CCC, assessing how well companies manage key ESG risks relative to industry peers. It’s one of the most prominent tools in ESG investing.
Sustainalytics
Sustainalytics offers ESG Risk Ratings that quantify unmanaged ESG risks, categorising companies from negligible to severe risk. These ratings support portfolio screening and stewardship by investors.
ISS ESG
ISS ESG Provides ESG corporate ratings and detailed analytics that align with global disclosure regimes, such as the EU Taxonomy and SFDR, as well as offering data on climate risk and shareholder voting.
A look to the future
As ESG performance continues to influence investor decisions, regulatory requirements, and consumer behaviour, voluntary standards, frameworks, and third-party ratings offer companies essential tools to measure, manage, and communicate their sustainability credentials.
For organisations that want to lead the ESG movement, embracing these tools early offers a strategic advantage. It enables more informed decisions, builds resilience, and helps secure the trust of stakeholders in an increasingly sustainability-conscious world.
Need a hand?
If you need help with understanding the world of ESG standards, frameworks, and ratings, our services can help you improve your disclosures.
